New Delhi: French company Dassault Rafale on Tuesday bagged India's biggest-ever contract for supplying 126 combat aircraft for the air force, edging out European competitor EADS in the multi-billion dollar deal.

The French firm was declared as the lowest bidder, according to which it will get the contract under India's defence procurement procedure, sources said.

"The French firm Dassault Rafale has emerged as the L-1 (lowest bidder) and cheaper than its European rival EADS (maker of Eurofighter) in the tender and will be offered to supply the aircraft to the IAF," the source said.

They said the representatives of Dassault here were informed about the development in the morning and further negotiations on price will be held with them in the next 10-15 days.The contract will be signed only in the next fiscal.

According to the Request for Proposal (RFP), the winner of the contract will have to supply 18 of the 126 aircraft to the IAF in 36 months from its facilities and the remaining would be produced at HAL facilities in Bangalore.

Six companies including American F-16 and F-18, Russian MiG 35, Swedish Saab Gripen alongwith Eurofighter and Dassault Rafale were in the race in the beginning.

But in April last year, the Defence Ministry shortlisted Dassault and EADS, evicting the American, Russian and Swedish bids.

The process was started with the issuing of a global tender in 2007 after which all the six contenders were subjected to extensive field evaluation trails by the Indian Air Force at several locations across the globe.

France's Rafale deal to include tech transfer: Sarkozy

Moreover, French President Nicolas Sarkozy on Tuesday said that he welcomed a decision by India's government to enter into "exclusive negotiations" with France's Dassault for the purchase of 126 Rafale jet fighter planes.

In a statement, Sarkozy said talks over the contract would begin shortly, adding that the deal would include significant transfers of technology guaranteed by the French state.

Dassault Aviation confirmed earlier that its fighter plane had been selected by the Indian air force.